Turbocharging Brand Strategy - Markus Kramer
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Turbocharging Brand Strategy

Turbocharging Brand Strategy

Analyzing brand strategy is sometimes confused with analyzing the company. Over the past year, I had the pleasure of engaging with arguably the world’s most iconic manufacturer of sports cars: Ferrari! It is, I believe, worthwhile contemplating some of the core branding principles with broader applicability for any marketer, communications professional and business leader looking to fine-tune or re-think their brand.

How does Ferrari turbocharge its brand? What are some of the challenges it faces today? Where does the brand get the power from to command a leading edge over other competitive cars? What are some of the key lessons Ferrari can teach us?

Musing on Ferrari’s success as a powerful brand, there are three ideas that are deeply engrained in the very genetics of the Ferrari marque: Luxury, Formula 1, and Italy. These three qualities don’t change over time and, as always, they continue guiding and governing all other elements and manifestations of the brand. Together, luxury, Formula 1 and Italy make up the large, invisible foundation of the Ferrari brand’s iceberg. The smaller, more visible tip of this iceberg is focused on cars and the company’s performance, but this isn’t necessarily how the brand figures in its clientele’s hearts and minds.


Lifting the hood

The power of Ferrari doesn’t just come from its mechanical performance. That’s only one aspect of the total power it commands over other luxury sports cars. The majority of Ferrari’s power comes from its iconic appearance. If we analyze the visual codes and the design identity of the luxury brand, we can easily see that it encapsulates and carries more Italian masculine identity than any of the other Italian super-high-end cars such as Maserati and Lamborghini. The brand embodies Italian spirit more eloquently than its competitors. Its design language exudes Italian vivacity and elements of ‘la dolce vita’.

“Ferrari’s design language exudes Italian vivacity and elements of ‘la dolce vita’.”

Ferrari is a luxury car brand that is famous for its organized scarcity strategies, which are at the heart of a very profitable perception management equation. The major components of this organized scarcity are: conscious and careful balance of supply and demand through a blend of the latest ultra performance, special and limited editions, selective distribution and, of course, a highly loyal and passionate client base. As a case in point, consider 2013, when the paradigmatic builder of super sports cars  publicly announced that it was cutting its production to less than 7000 cars per year. The effect? Sales for the brand rose by 5% and profits surged 9% [1]. Alongside such profits, deliberately creating scarcity means that the ability to pay a large amount of cash does not automatically qualify someone for ownership. Instead, one must join lengthy waiting lists, which are subject to a close-knit screening system. Having to wait may seem to fly in the face of today’s consumerist culture of instant gratification. But the trick is that having to wait fuels the perception of exclusivity and plays on the idea that ‘good things take time’. As Kyle Stock from Bloomberg writes: “As in any thoroughbred business, net worth is merely a prerequisite for Ferrari ownership: commitment and decorum are the only true considerations.” [2]

The Ferrari Owners’ Club is like a good old cult of exclusive fraternal organization. It offers a perfect meeting space, both physically and intellectually, for like-minded enthusiasts gravitating around a shared territory of passion. True, status purchase is important, but the further up the value chain the brand aims (think V12 engines, or La Ferrari), the truer the spirit of what Ferrari stands for. A holistic, all-stakeholder encompassing event management system further strengthens post-purchase P.R. (Powerful Relations) for the brand. If you thought Customer Centricity and Co-Creation of value with customers are inventions of recent technological advances, think again. Just like many other luxury brands, companies such as Ferrari and Harley-Davidson have been integrating their most loyal customers into powerful, company-facilitated eco-systems long before the rise of social media and its respective opportunities.


Super Acceleration & Carbon-Ceramic Braking Power

Like any high-end super sports car manufacturer, Ferrari operates in a small, albeit highly aspirational and lucrative market segment facing a number of macro- and socio-economic challenges, ranging from slowing economies to taxation and regulatory frameworks (e.g. emission). Whilst the brand is as strong as ever, there are a number of potential challenges that the Ferrari brand faces. For instance, listing a proportion of Ferrari on the public market raises much needed capital for R&D, but increases expectations for the brand to leverage its brand equity outside its core, into much broader luxury categories. Although this opportunity is tempting, there is a real possibility of diluting the brand. The market is saying that so far the team in Maranello is getting this tricky balance just right (RACE[3]). From a brand management standpoint, Ferrari on the track adds brand value to Ferrari on the road. When it comes to competing, anything other than the first place in Formula 1 is a loss for Ferrari.4 The emblem of the prancing horse needs to move up the rankings, and anything other than getting to number #1 isn’t going to cut it. To leverage the brand successfully, this will have to be true outside the core, too.

“In order to avoid diluting the brand in the future, managed scarcity may not be enough.”

In order to avoid diluting the brand in the future, however, organized scarcity may not be enough. I’ve recently written on the changing nature of luxury consumers,5 proposing that values, sophistication and taste offer a new frontier that brands need to master in order to remain (and flourish) at the epitome of aspiration. For a power-brand like Ferrari, strategic brand reflections will also have to focus on consumer segments outside its traditional core (Grand Touring, to name one), as well as on very simple levers, such as color for instance. And whilst Tom Selleck (Magnum) and Don Johnson (Miami Vice) embodied and transported the brand perfectly well in the 80ies to places like the US (Ferrari’s largest market today), the purist Ferrari-in-red appearance may no longer connect with younger consumers or non-core-sports-car audiences. Non-red Ferraris that still capture attention, but in a less pretentious manner, offer a great way to create tasteful relevance underneath the brand’s umbrella of aspiration.

The Drive

Ferrari

The structural drive of the HNWI6-segment purchasing Ferraris is often summarized as – “Big Toys for Big Boys”, though this is a populist viewpoint at bestBecause Ferrari is certainly not an expression of mere status. It is an extension of power. The roaring engine is the indication of its power. The manifestation, not the exertion or assertion, of its brand power is clear even when only cruising along at 60 km/h. It is meant to be an extension of its driver’s pre-existing power.

“Ferrari’s brand has the opportunity to increasingly create relevance beyond the expression of status.”

Overlaying the brand’s past and future ambitions with the notion of the increasing sophistication and taste of its target audience, a train of thought worth pursuing is to look at the change in perceptions of ‘power’. Specifically, what is the difference between ‘exerting power’ and ‘owning power’? It is a subtle difference, yet it has broad implications. For instance, how often, would you say, do Ferrari owners actually use their car’s power? How often is the car driven at 350 km/h? The response to this would suggest that the drive behind purchasing into the world of Ferrari is more about owning power than about using or exerting it in everyday life, albeit unconsciously. It is about having the means to make oneself powerful. But actually using these means isn’t necessary to be recognized as a person of power. The magic is in the belief others hold in regards to one’s will to use these means: underneath that brand-iceberg lays a lot of Ferrari’s unwavering power.

Sharpening powerful engines and delivering peak performance on the Grand Prix track is the visible DNA of Ferrari: a brand that stands proud in a realm of success. Just as marketers refine their value propositions in contemporary times, Ferrari adjusts its products and brand in subtle, yet relevant ways. Turbocharging its latest cars with sub-four liter engines, for example, isn’t just an engineering feat, but an adjustment to the world at large, making sure the brand stays in business and fascinates future generations to come.

What are you doing to achieve this higher dimension for your own brand strategy?

Resources & References

  1. http://www.bloomberg.com/news/articles/2014-08-14/rare-ferrari-expected-to-fetch-up-to-75-million
  2. http://www.bloomberg.com/news/articles/2016-04-13/we-applied-to-buy-a-400-000-ford-gt-here-s-what-we-learned?bcomANews=true
  3. http://www.marketwatch.com/investing/stock/race
  4. https://www.formula1.com/en/latest/features/2016/6/winners-and-losers—europe.html
  5. http://www.markuskramer.net/the-changing-nature-of-luxury-customers/
  6. http://www.nielsen.com/eu/en/solutions/high-net-worth-individuals.html

Image Credentials: Ferrari.com